CHM Blog

Interest rate markets began quietly this morning, stock indexes a little weaker. There isn’t any market-movement today and we expect the day will be very quiet.

Next Thursday the Jackson Hole economic summit is the focus now for financial markets.Jerome Powell expected to be more delineating about when the Fed may begin tapering that is now fully embedded in markets. It is when, how much, and whatever caveats that may be attached to any plan to reduce the Fed’s balance sheet. Most Fed officials now agree that the Fed buying $120B a month of treasuries and MBSs is no longer needed. $40B a month of MBS buying, when tapering begins is getting a thumbs up that it won’t cause any damage to the mortgage industry or mortgage rates.

Mortgage payments using cryptocurrencies are about to happen. United Wholesale Mortgage's servicing customers might be able to make their monthly payments in digital currency, Chairman and CEO Mat Ishbia said on the company's third quarter earnings call. "We've evaluated the feasibility and we're looking forward to being the first mortgage company in America to accept cryptocurrency to satisfy mortgage payments," Ishbia said. "That's something we were working on, we're excited to hopefully in Q3 we can actually execute on that before anyone in the country, because we are a leader in technology and innovation."

For the first time since 2011, lending activity shrunk in the second quarter from the first, according to Attom Data Solutions. 3.78 million home loans produced in the second quarter of 2021, down 2.9% quarterly from a revised 3.89 million while jumping 29.3% annually from 2.92 million. Loan volume totaled $1.18 trillion, down 0.6% from $1.19 trillion in the first quarter and spiking 38.9% from $853.3 billion the year before. The steady climb of home prices in the past year likely accounts for why dollar volume rose even though the number of loans fell. Refinancing activity accounted for 2.23 million loans, a quarterly drop of 14.8% from 2.62 million and an annual increase of 25.5% from 1.78 million. Purchase growth partially offset the refinancing dip with 1.32 million originations, surging 22.4% from the first quarter’s 1.08 million and 52.4% from 866,782 in the second quarter of 2020. Those combined for $465.5 billion, representing jumps of 30.9% quarter-over-quarter and 77% year-over-year.

At 9:30 am ET the DJIA opened -27, NASDAQ +39, S&P +2. 10 yr. unchanged at 1.24%. FNMA 2.0 30 yr. coupon at 9:30 +3 bps from yesterday and +3 bps from 9:30 am yesterday; the 2.5 coupon at 9:30 am unchanged and +1 bp from 9:30 am yesterday.

Want to make predictions, ask Bank of America how to do it and not embarrass yourself. BofA released its forecasts for the 10 yr. note from now through the end of the year; an extremely wide range but not to criticize. In the next three months, we will likely get some answers to the big questions. Is inflation really transitory? How is the delta-virus spread really hitting the economic outlook? In this context, how will the Federal Reserve begin scaling back ultra-loose policy? Will Democrats get their $3.5 trillion social spending bill passed? Based on these issues the range outlined from BofA for the 10 yr.; below 1.0% or as high as 2.0%; it’s a wide range but understandable. What it really reflects is, there is little confidence about the direction of interest rates.

Looking for a quiet day for the interest rate markets today. No news, no data, next week’s Jackson Hole summit and additional information about the Fed’s tapering. On Monday the House is scheduled to return to take up the debt ceiling that has expired, Republicans are not likely to go along with Dems. Forcing Dems to act alone or the government will shut down and Treasury will default on the debt. No worries about the result, politicians will not let a default happen, sometime before the final hour either the budget will be suspended or increased.

Rate markets may slip a little today with the weekend ahead and what traders and investors have to work with next week. At 10 am MBS prices down 3 bps from yesterday; the 120 yr. 1.25% +1 bp.

PRICES @ 10 AM

10 yr. note: 1.25% +1 bp

5 yr. note: 0.77% unch

2 Yr. note: 0.22% unch

30 yr. bond: 1.88% unch

Libor Rates: 1 mo. 0.087%; 3 mo. 0.130%; 6 mo. 0.154%; 1 yr. 0.235% (8/19/21)

30 yr. FNMA 2.0: @9:30 101.39 +2 bp (+3 bp from 9:30 am yesterday)

30 yr. FNMA 2.5: @9:30 103.78 unch (+1 bp from 9:30 am yesterday)

30 yr. GNMA 2.5: @9:30 103.33 -2 bp (+3 bp from 9:30 am yesterday)

Dollar/Yuan: $6.5001 +$0.0053

Dollar/Yen: 109.83 +0.06 yen

Dollar/Euro: $1.1677 unch

Dollar Index: 93.58 unch

Gold: $1783.40 +$0.40

Bitcoin: 47,760 +1096

Crude Oil: $62.22 -$0.47

DJIA: 35,063 +170

NASDAQ: 14,668 +126

S&P 500: 4432 +27

Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

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